Hepner Corporation has the following stockholders’ equity accounts: Preferred st

Question

Hepner Corporation has the following stockholders’ equity accounts: Preferred stock (5% cumulative dividend) $ 640,000 Common stock 890,000 Additional paid-in capital 440,000 Retained earnings 1,090,000 The preferred stock is participating. Wasatch Corporation buys 80 percent of this common stock for $1,740,000 and 70 percent of the preferred stock for $770,000. The acquisition-date fair value of the noncontrolling interest in the common shares was $435,000 and was $330,000 for the preferred shares. All of the subsidiary’s assets and liabilities are viewed as having fair values equal to their book values. What amount is attributed to goodwill on the date of acquisition?

Explanation / Answer

In balance sheet equity along with liabilities is equal to total book value of assets.

So the book value of assets as on acquisition date = 640000 + 890000 + 440000 + 1090000 = $3,060,000.

Goodwill Calculation:

Fair value of consideration = 1740000 + 770000 = $2510000

Add: Non controlling interest = 435000 + 330000 = $765000

Total = $3,275,000

Less: Fair value of net identifiable assets = ($3,060,000)

Goodwill = $215,000

Related Questions

Navigate

• Browse (All)
• Browse H
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.